Palm losses mount despite the Pre
Updated at 2:55 p.m. PDT with information from the conference call.
Sales of the Pre helped boost Palm's smartphone sales in the company's fiscal first quarter of 2010 by about 134 percent compared to the preceding quarter, but Palm still reported its eighth consecutive quarter of loss, and sales dipped over 80 percent.
The Palm Pre.
(Credit: Corinne Schulze/CNET)The Palm Pre, available exclusively through Sprint Nextel, is gaining traction. The company sold 823,000 smartphones in the fiscal first quarter. Many of those smartphones are believed to be the Pre.
But even though sales of the Pre were strong, Palm still ended up losing $164.5 million, or $1.17 per share in its fiscal first quarter. Still, the company's losses beat analyst expectations. Excluding items, the company posted a loss of 10 cents a share. Analysts had predicted a loss of 25 cents a share, according to Reuters.
Palm's sales declined to $68 million. But on a non-GAAP basis, revenue came in at $360.7 million. Wall Street analysts had predicted between $289 million and $297 million.
Palm has struggled to regain footing after losing market share over the last couple of years to companies like Apple with its iPhone and Research In Motion, maker of the BlackBerry devices. The Pre has been seen as the company's last hope at getting back in the game.
CEO Jon Rubinstein said on the company's conference call that Palm plans to focus exclusively on its Web OS software. This new operating system is the foundation of the Pre and Palm's latest device, the Pixi. While the company will continue to sell the current generation of Palm Treo products that use Microsoft Windows, it will focus its research and development on Web OS. And all its future products will be Web OS-based, Rubinstein said.
The move is not surprising given Palm's investment in Web OS, but nonetheless it is a blow to Microsoft, which has been struggling to maintain support for its Windows Mobile operating system. Microsoft made a big deal when it first landed Palm as a licensee back in 2005. Then Palm CEO Ed Colligan took the stage with Microsoft Chairman Bill Gates in San Francisco to tout the new alliance.
Palm executives also said the Pre will soon be available on other carrier networks. In Europe it will soon be available on Telefonica's network. And other carriers will soon follow.
The Pre faces stiff competition in the upcoming holiday season. In addition to the iPhone 3GS, which launched in June, there are several new phones coming to market, including several Android devices. T-Mobile is expected to push its HTC-made MyTouch.
Motorola is also launching new Android devices on T-Mobile's network. Pricing details and a launch date for the new Motorola Cliq haven't been announced. But the device is supposed to be on sale before Christmas. And Motorola is expected to announce another Android phone in the coming weeks.
RIM is also expected to launch a new BlackBerry Storm on Verizon's network in time for the holidays, too.
Still, Palm executives said they believe they have a strong lineup going into the holiday season with the launch of the new Pixi phone, a lower cost device than the Pre, which will also be available on Sprint's network.
Separately, Palm also said that it is planning to sell 16 million shares of common stock. Elevation Partners, which already owns a sizable stake in Palm, expects to buy $35 million worth of stock in the offering, Palm said.
Investors seemed pleased with Palm results, and the company stock, which closed at $14.44 on Thursday, was trading up in the after market.
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
looks like failure to me for Palm.
Still only what, 60 'apps'?
The 2nd Pre might help them when more apps are made.. Pixi won't do much.
HTC Hero on Sprint will cut hard into Pre going forward.
That's the problem.. you cant come late to the game.. one that has already matured... and then make people wait for the key features. The Pre needed to hit the ground running.. and then keep the pace. Instead, Palm decided they wanted to let this fizzle while they deal with high Pre return rates due to quality control and design issues. They had a chance and blew it.
THANK YOU, SIR!!!!! My sentiments exactly. Reading the mindless drivel that spews out of these naysayers (mostly the iSheep) reminds me of how utterly clueless people have been about the Palm Pre's launch and about business in general. Remember, WEBOS is the product here, not the Palm Pre. Almost everyone has said that the software (WebOS) is unlike anything they have seen to date, and it runs circles around both iPhone and RIM OS offerings. Palm will concentrate less on the development of devices and more on licensing of their OS to other companies (like Google's Android with HTC and Motorola). In addition, Elevation Partners continues to show financial backing for the company...
... did you iSheep get to read that far, or did your eyes just gloss over?
First, they can develop "multiple" apps THEMSELVES using their SDK instead of just the limited number they had at launch. From there, you deal with 3rd party groups to develop specific apps so they will be available at launch (They have been doing this lately finally!).
To sum it all up, they should have been working on a rich app catalog before releasing the pre. Apple had the luxury of having limited apps on release because it was new and no one had even come close to cornering the market yet. Palm doesn't have that luxury. They are up against a massive juggernaut and coming out of the gates without a MASSIVE backing is likely to fail. That's simple logic and it's the way things are.
I really hope Palm survives, I always used to love Palm before they went WinMo and am really glad to see more competition in the smartphone/device market! I hope for the best but fear for the worst is all. :(
Who says that this is possible? The issue here is that the lack of a substantial catalogue of applications puts the Pre at a competitive disadvantage and it then enters into a "Chicken vs. Egg" scenario. Developers will not invest time developing applications for it if the device does not sell well yet customers may well choose other platforms because they have a bigger selection of applications. The problem that Palm had, and perhaps still has, is that it was in a no-win situation. They had to get a device onto the market before the company went bankrupt but they clearly rushed it with an unfinished SDK that means that the platform continues to lag behind others.
Needless to say there are people who will say that Palm is doing nothing more than Apple did when it released the iPhone without an SDK. If both devices had been released at the same time then this would not be a problem for Palm but that isn't the case and Palm cannot expect to achieve success by doing what Apple did. A rich application catalogue seems to be what customers want now and Palm NEEDS to deliver one and very quickly if it hopes to continue in the market.
My eyes usually gloss over when reading something that was written by a WinLemming.
"The company sold 823,000 smartphones in the fourth quarter, of which many are believed to be the Pre."
As you suggested.. that paltry number isn't even total Pre sales.. it includes other phones!! Will all of the artificial hype surrounding it's release.. the Pre has been a failure. Palm set this up to fail... it seems.. or they are incredibly stupid (lack of developer tools for an iPhone competitor..).
Also... forgot to correct you on your last post... the Pre's return rates have been average. There were known issues as there are for any device after launch (I should know... I returned my first iPhone 1.0 for speakerphone malfunction), but overal return rates have been nowhere out of the ordinary.
For that matter, if you are a programmer on Apple or Blackberry or Google OS, how can you not look at Palm as a viable option for your applications. I've heard Apple now has so many apps to choose from that developers are switching platforms with present and future products and migrating to less popular devices simply to be a front runner and provider for those platforms. Palm Pre is a great opportunity and well worth the investment as a user and developer.
vara411, your point and notes are Loud and Clear to me..and I loved the satire... Keep it up
No, what the WebOS platform is is a risk. I perfectly understand that it represents an opportunity but you have to consider the risk/reward. On the one hand, your WebOS application may be seen as being very good so it not only sells well in a marketplace that is far from crowded and also helps encourage cellular telephone customers to buy WebOS devices and therefore increase your available customers. On the other hand, time spent developing/supporting the WebOS application is time that you are not spending on your applications for other platforms and there is no guarantee that the WebOS platform will actually succeed.
Fortune may indeed favour the brave but not all the time. Deciding to support the WebOS platform is a calculated risk.
In the July 2008 quarterly call, Apple reported 717,000 units sold for the April to June quarter. That is 700K units iPhone. Palm sold 810K+ units with "a majority" of them being Pre but Rubinstein would not say how many. So of course people can question the exact number.
As for all the doom and gloom surrounding Palm, I think Palm still has a chance. Its 16m shares will raise much needed cash to keep going a bit longer until Summer 2010. What Palm can do over the next 12 months will determine if we are watching a "come back" story or a "merge in progress".
I agree that the Pre sales are hardly "strong" compared to other launches. The 3GS sold over 1 million in the first weekend and that was barely an upgrade. Frankly. I expected to see a lot more Pre sales, given how great a phone it supposedly is. One of my friends who has one though said she hates the cheap feel and that it already chipped on the corner. I am a fan of the Pre and want to play with one, but sadly, it didn't make the splash everyone expected it to. It made more of a ripple.
I'd be more curious to see the Pre's numbers compared to Blackberry, Android, TouchPro, etc...that's more realistic. By your math every phone that didn't sell 1 mil in the first weekend is a "failure". Simply not true.
I suspect the assumption here is that customers are no longer interested in buying the iPhone but that is not necessarily the case. Here in Belgium, for example, there is still strong demand for the 3GS but supply is so small that there simply isn't any stock. I have been on a waiting list for a 32GB White version since early July and I still can't get one. I have no idea whether the situation is the same elsewhere but it must be considered that supply/inventory issues can restrict sales.
@drtydogg While they have tapered off some, the sales are still strong and have been strong for the iPhone over it's entire lifetime. I blame the fact that not enough people were willing to switch for the Pre from their network.
Interviewer: Is the Palm Pre making a dent into the iPhone market?
Sprint CEO Dan Hesse: Aaah... It's-it's doing well, but you can almost put the iPhone, to be fair, in a separate category. The Apple brand and that device have done so well, it's almost not... it's like comparing someone to Michael Jordan.
http://gizmodo.com/5357447/sprint-ceo-on-pre-vs-iphone-its-like-comparing-someone-to-michael-jordan
This is an issue with Sprint's (and soon, Verizon's) CDMA network, and not the phone. This issue will be moot once the GSM version of the Pre is launched.
Can your iPhone do that ? NOPE !
A better question: why would I want 10 applications running at the same time when I can only interact with one at a time? I can understand why multi-tasking on a desktop computer is important but on a cellular telephone it is not. Frankly, the argument that other devices had copy/paste while the iPhone did not was much more important than multi-tasking.
Ask Leo if his Pre, if he even has one, can make a phone call and surf the web at the same time. Don't expect an answer from him, he is nothing more than troll. The iPhone multitasks things that are important.
Not like AT&T doesn't have it's limitations...
You would want to toggle between apps if you are doing something that has you needing to toggle between apps. Normally I have 2 or 3 going one some key tasks. What your key task may be would be different from mine.
Palm sales didn't dip over 80%, that figure comes from the switch in accounting methods. In order to make historical comparisons, Palm also provided "Non-GAAP Adjusted Revenues", which is its sales for the quarter using the old accounting method. Palm's non-GAAP adjusted revenue for the quarter was $360.7 million, which represents a drop of 1.7% from the previous quarter's $366.9 million. These numbers are from Palm's press release at http://investor.palm.com/releasedetail.cfm?ReleaseID=409998.
Likewise, the analysts' sales forecasts "between $291 million and $297 million" were based on the old accounting method. Palm actually significantly exceeded most analyst expectations with sales of $360.7 million.
Disclosure: I work for Palm, but I have no knowledge of the financials beyond what I've read in the press.
... P.S. Hurry and release the GSM version. I know a lot of people on GSM networks waiting in the wings for a GSM Palm Pre. ;)
http://en.wikipedia.org/wiki/File:IPhone_sales_per_quarter.svg
AT&T has said that 40% if new iPhone subscribers switched to AT&T from another provider. I wonder how many are switching to Sprint for the Pre? I suspect a very small percentage because the few friends I know who have the Pre were already Sprint customers.
These numbers are only going to continue to soar as the Palm Pre is now being sold to thousands of Canadians which many have already expressed positive reviews.
Europe and UK..is now on target for the next country to get Palm Pre's. It won't be long before they reach the 1 million mark remarkably for it's first generation release!
This isn't black & white and if you think for even a millisecond that even 1/2 of the 800,00+ people were "stolen" from Apple by the Pre then man, I've got a hell of a bridge to sell ya!
http://gigaom.com/2009/04/22/why-att-is-desperately-addicted-to-the-iphone/
Show me where you got your 25% number.
Besides pixi is directed at a very specific and younger crowd.
They are stupid terms and were not originally intended to be used for the current devices.
Pop in a few quarters ans surf the net in the Apple iPod Bwahahaha !
When Palm does the same it is just plain crazy. They've been in business for long time and they know that certain features cannot be omitted because it makes people upset. For example no ability to forward sms, no ability to copy/paste from a browser or cannot copy/past text message, no ability to change ringtones for text messages, cannot search email, plus some other annoying things. Palm had all those features on other devices, so Palm knows that people need them.
Battery is a joke; did they even test it? It looks like they rushed to finish the device. I am sure Hero will put them out of misery.
Most analysts were cautious only because they want to see Palm get phones on more providers , which they are...including Europe. They want to see Palm do well for a quarter or two more before they can truly feel comfortable calling the turnaround a success , thats all.
Since when was the UK not part of Europe? Did I miss a memo or something?
You missed the memo that said. "Try to listen and understand what the other guy is trying to say" or in this case read. Yes he could have said "but not in the rest of europe" and made the grammer police happy, but I understood what he said.
of all crappy service providers they picked them ._o
- by jbelkin September 17, 2009 8:05 PM PDT
- Um, Apple sells @15 MILLION iPHONES a QUARTER ... palm sold 823,000 smartphones TOTAL. Nothing wrong with the Pre but it's no iPhone and palm is no Apple and sprint is not AT&T ... (well, marketing $ wise). At least Palm can beat out MS WINCE phone sales but otherwise ...
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- by frozenjello September 17, 2009 8:34 PM PDT
- In this July 2009 press release, the third paragraph says "Quarterly iPhones sold were 5.2 million".
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